Cramer’s 10 Hottest Momentum Stocks
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The shift from paper to plastic is one of the "biggest secular growth stories on earth, " Cramer said, referring to how a growing number of consumers are using credit cards. To play this trend, Cramer recommended investors consider Visa, but he also likes rival MasterCard .
MasterCard currently controls roughly 30 percent of global credit card volumes and 12 percent of global debit volumes.
Like Visa, Cramer noted MasterCard also has a strong balance sheet. It currently boasts around $5 billion in cash and a solid management team, too.
MasterCard currently sells for 18 times 2013 earnings, which Cramer thinks is inexpensive given it has long-term growth rates in the double-digits.
Ulta Salon, Cosmetics & Fragrance (ULTA)
Ulta Salon, Cosmetics & Fragrance made Cramer's list of hot momentum stocks.
"When you have a retailer that's expanding from being a regional player to a national one, you've got a stock that could generate tremendous multi-year gains, " Cramer said. "Right now we're in an environment where there aren't a lot of companies with genuinely rapid growth, but Ulta Salon … [has] the kind of long-term secular growth that makes money managers salivate."
Cramer noted Ulta currently has roughly 489 stores in 45 states, which seem to be doing well judging from its 9.3 percent increase in same-store sales in the latest quarter. In the year ahead, Cramer said Ulta plans to open about 100 new stores, increasing its total square footage by 22 percent.
Ulta is also taking share in the beauty business, Cramer said. It's already the U.S.'s leading specialty retailer, but even so, Cramer noted it only controls 2.8 percent of the beauty products market and 0.2 percent of the salon services market. So he thinks Ulta has a lot of room to take share.
Cramer said Ulta also has healthy inventory levels, which increased just 3.9 percent on a per store basis last quarter. The company also has a strong management team, he added.
Ulta currently sells for 29 times next year's earnings, which Cramer said seems high, but there is more than meets the eye.
"Ulta's far from the average stock, as it has a terrific 25 percent long-term growth rate, " Cramer said. "Remember, though, the money managers who will buy these stocks are valuing them based on the earnings in the out-years and when you look at the estimates for 2015, Ulta's only trading at 18 times those numbers, which seems pretty darned cheap."
Tractor Supply (TSCO)
Tractor Supply will likely be "anointed by the Wall Street fashion show as a fourth quarter winner" because the retailer is rapidly expanding from a regional to national store chain, Cramer said.
The tractor supply retailer currently has 1, 135 stores in 45 states, Cramer said. It plans to open up to 95 additional locations in the year ahead, giving it lots of room to grow. Tractor Supply thinks it can build 2, 100 stores in the U.S. before it risks saturating the market, which is an 85 percent increase from its current store count.
In its latest quarter, Tractor Supply produced a 3.2 percent increase in same-store sales, which Cramer called "decent." The retailer has very little competition, though. It also saw its inventory levels fall by 0.3 percent on a per store basis last quarter.
"Remember, excess inventory is the bane of all retail existence because it means you have to discount to move product, which kills the profit margins, " Cramer said.
Tractor Supply currently sells for 23 times next year's earnings and just 16 times 2015 earnings estimates, Cramer said. Considering its 18 percent long-term growth rate, he thinks it's a cheap stock.
